Charles Schwab Plans Layoffs as Falling Interest Rates Hurt Profit

Corp. is cutting about 600 jobs as it deals with the impact of lower interest rates.

Chief Executive

Walt Bettinger

discussed the coming layoffs, which would amount to roughly 3% of the San Francisco brokerage’s staff, in a recent town hall with some employees, according to an attendee. The cuts are part of an effort to rein in expenses as falling interest rates pinch profit at Schwab’s banking arm, said people familiar with the situation.

Schwab’s rate-sensitive bank is a huge part of its business. It made up more than half the company’s overall revenue of $10.13 billion last year, up from about a quarter in 2009.

The move by Schwab comes as firms across Wall Street and beyond grapple with a shift in Federal Reserve policy that surprised some people. After holding interest rates near zero for years after the 2008 financial crisis, the Fed began lifting them in late 2015. Banks and brokerages reaped the benefits, raising lending rates while keeping interest on clients’ cash low.

Concerns over slowing economic growth and trade policy spurred the Fed to reverse course, cutting rates this summer and signaling it would do so again.

Another Schwab executive, in a separate meeting with employees, said Schwab was wrong in its interest-rate forecasts and hadn’t expected the Fed to cut rates, according to a person in the meeting.

Many of the jobs eliminated are expected to be in the retail division that includes Schwab financial advisers and others who work with clients to manage investments, the people said, though the cuts aren’t limited to that part of the business.

In July, Schwab let go of two top executives, one of whom ran the retail business.